Major depressive disorder (MDD) is prevalent and imposes a very high societal burden in terms of cost, morbidity, quality of life, and mortality. While psychological treatments are both effective and acceptable to patients, a variety of barriers exist both to initiating and completing psychotherapy. Telemental health has been proposed as a method of overcoming barriers to treatment. Research has focused primarily on two formats: the telephone and the Internet. Telephone-administered cognitive behavioral therapy (T-CBT) appears to be equivalent to face-to-face CBT in efficacy, but produces fewer dropouts. However, T-CBT's success in improving access could also significantly increase costs for healthcare providing organizations. Internet CBT (iCBT) is typically a web-based program that provides didactic training and interactive tools to teach CBT skills. iCBT guided by brief coach or therapist via telephone is substantially less costly and more cost effective and standard face-to-face treatment, but produces more moderate improvements in depression and produces comparatively high levels of attrition. Developing a treatment delivery model that integrates T-CBT and iCBT holds the promise of harnessing the advantages of each medium, while minimizing the disadvantages. A stepped care model, in which patients begin with iCBT and are stepped up to T-CBT only if they do not improve, is a potentially useful framework for achieving a successful integration. We have proposed a randomized controlled trial (RCT) that will recruit 310 patients with MDD, and randomly assign them to stepped care or T-CBT. Patients will remain in treatment for 20 weeks, or until full remission is reached, at which point treatment would be discontinued. It is hypothesized that 1) the stepped care treatment will not be inferior to T-CBT and 2) stepped care will be more cost-efficient.